Vertex Resource Group Ltd. reports strong second quarter 2019 results

Sherwood Park, Alberta, August 9^th, 2019 (TSXV:VTX) – Vertex Resource Group Ltd. (“Vertex” or the “Company”) reports its financial and operational results for the three and six months ending June 30, 2019, with comparisons to the same period in 2018. The following operational and financial highlights should be read in conjunction with the Management Discussion and Analysis (“MD&A”) and the interim consolidated financial statements and notes thereon of Vertex for the three and six months ending June 30, 2019, which are available on SEDAR at www.sedar.com.

“We continue to perform well, as we aggressively improve the Company’s financial performance while paying down our debt. Our second quarter results were strong, slightly exceeding expectations despite abnormally wet weather in the quarter. 70% of our revenue was derived from stable operating, maintenance and remediation expenditures of our customers. By tapping into these consistent spends of our customers, we have been able to deal with numerous headwinds this quarter. Vertex’s diversification strategy continues to pay dividends as we position the Company to efficiently perform a diverse set of services that provides value to customers across all industries throughout the life cycle of their projects.” commented Terry Stephenson, Chief Executive Officer.

Vertex drove increases in both revenue and EBITDA by continuing to execute on a strong backlog throughout the quarter, focusing on controlling costs, streamlining processes through technology improvements and cross-selling service to customers. The Company’s current financial position is the direct result of these efforts, prudently purchased acquisitions which are performing well and the continued implementation of Vertex’s strategic cross-selling and customer diversity initiatives. As such, Vertex continues to grow its customer base, with 47% of revenues for the remainder of 2019 expected to come from outside of the oil and gas industry. Specifically, Vertex’s customers continue to grow and provide stable and attractive opportunities in the utilities, agriculture, municipalities and telecommunications industries.

Key financial highlights of Vertex’s results for the three and six month periods ended June 30, 2019, and 2018 are as follows:

The results for the second quarter of 2019 improved over the second quarter of 2018 with the Company’s efforts resulting in improved revenue, gross profit and EBITDA, while reducing general and administrative costs (“G&A”) from the second quarter of 2018 to the second quarter of 2019.

HIGHLIGHTS FOR THE THREE MONTHS ENDING JUNE 30, 2019

Revenue for the second quarter of 2019 increased 48.5% to $41.1 million from the same quarter in 2018. This revenue increased due to continued growth from completed acquisitions and expansion into new markets and industries.

Gross profit for the second quarter of 2019 was $10.1 million, up 15.6% from the second quarter of 2018.

G&A decreased by 14.2% to $3.8 million in the second quarter of 2019, from the second quarter of 2018. As a percentage of revenue, G&A was down to 9.3% in the second quarter of 2019 versus 16.1% in the second quarter of 2018.

EBITDA for the second quarter of 2019 increased to $6.3 million, up 46.9% from the second quarter of 2018.  This increase occurred because of continued growth from completed acquisitions in Vertex’s Environmental Services segment during the quarter.

Strong Cash Flow provided by operating activities of $12.0 million allowed Vertex to reduce total borrowings by $9.7 million in the first half of 2019.

OUTLOOK

For the remainder of the year, indicators point to a continuation of current trends with respect to client activity levels, pricing and margin pressures. Recent announcements regarding Canadian LNG, pipeline and oilsands projects are positive for both the oil and gas industry and Vertex’s expected future results. With a change in the political landscape in Alberta, the new provincial government continues to create regulatory and economic reform that should bring investment confidence back to the oil and gas industry within western Canada, although this will take time to occur. Continued spending on planned maintenance programs, increased abandonments and the need for companies to focus on environmental liabilities to remain operational are expected to present Vertex with additional opportunities in the near future.

Vertex continues to focus on factors within its control and believes a more positive outlook is ahead for the remainder of 2019. The Company remains cautiously optimistic about future activity levels as it plans to focus on further integrating past acquisitions, consistent execution and active management of costs. Vertex offers a unique set of services that offers value to clients at each stage of a project from planning to execution of operations, to completion and reclamation which is unmatched by competitors. This integration of service offerings allows the Company to cross-sell complementary services between segments to clients within a variety of industries while lowering customer’s costs and providing integrated solutions to address their environmental liabilities. This creates value for the Company’s clients and is expected to present Vertex with additional opportunities both within and outside of the oil and gas industry. Vertex expects to continue growing organically by capitalizing on existing and emerging contracts and relationships within the upstream and midstream oil and gas, utilities, telecommunication, forestry, agriculture and government sectors.

Vertex remains committed to creating shareholder value for the longer term by continuing to focus on further improving its operational and financial performance. In addition to these commitments, Vertex continues to focus on reducing debt, reducing its cost of borrowing, actively managing working capital and evaluating its capital expenditure plans to match core and strategic opportunities. Accretive, complementary and opportunistic acquisitions remain an essential component of Vertex’s long-term growth plans as it continues to integrate acquisitions and evaluate future opportunities when beneficial.

ABOUT VERTEX

Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 600 employees and lease operators that provide services to help clients achieve their development goals. From initial site selection, consultation and regulatory approval, through construction, operation and maintenance, to conclusion and environmental cleanup, Vertex provides a wide array of services to customers operating in industries such as upstream and midstream oil and gas, utilities, telecommunication, forestry, agriculture and government.

Vertex principally operates in western Canada and in select locations in the United States.